Whereas, pursuant to subsection 332(1) (see footnote a) of the Canadian Environmental Protection Act, 1999(see footnote b), the Minister of the Environment published in the Canada Gazette, Part I, on October 29, 2011, a copy of the proposed Regulations Amending the On-Road Vehicle and Engine Emission Regulations (On-Board Diagnostic Systems for Heavy-Duty Engines and Other Amendments), substantially in the annexed form, and persons were given an opportunity to file comments with respect to the proposed Regulations or to file a notice of objection requesting that a board of review be established and stating the reasons for the objection;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to section 160 of the Canadian Environmental Protection Act, 1999, (see footnote c) makes the annexed Regulations Amending the On-Road Vehicle and Engine Emission Regulations (On-Board Diagnostic Systems for Heavy-Duty Engines and Other Amendments).

AMENDMENTS

1. (1)The definitions “curb weight” and “rounded” in subsection 1(1) of the On-Road Vehicle and Engine Emission Regulations(see footnote 1) are replaced by the following:

“curb weight” means, at the manufacturer’s choice, the actual or manufacturer’s estimated weight of a vehicle in operational status with all standard equipment, the weight of fuel at nominal tank capacity and the weight of optional equipment. (masse en état de marche)

“rounded” means rounded in accordance with the rounding method described in section 6 of the ASTM International method ASTM E 29-93a, entitled Standard Practice for Using Significant Digits in Test Data to Determine Conformance with Specifications. (arrondir)

(2) The definition “année de modèle” in subsection 1(1) of the French version of the Regulations is replaced by the following:

3. Subject to subsection 24(7), these Regulations apply to vehicles whose main assembly is completed in Canada on or after January 1, 2004, to engines whose manufacture is completed in Canada on or after January 1, 2004 and to vehicles and engines that are imported into Canada on or after January 1, 2004.

3. Section 4 of the Regulations and the heading before it are repealed.

4. (1) Paragraph 6(3)(a) of the English version of the Regulations is replaced by the following:

(a) any vehicle whose main assembly was completed 15 years or more before the date of its importation into Canada; or

(2) The portion of subsection 6(4) of the Regulations before paragraph (a) is replaced by the following:

(4) For the purpose of section 152 of the Act, the prescribed vehicles and engines are the classes of vehicles referred to in subsection (1) whose main assembly is completed in Canada and the engines referred to in subsection (2) whose manufacture is completed in Canada, except

5. Sections 9 and 10 of the Regulations are repealed.

6. The portion of subsection 15(1) of the Regulations before paragraph (a) is replaced by the following:

15. (1) Subject to subsection (2) and sections 19 and 19.1, a diesel heavy-duty vehicle of a specific model year, other than a medium-duty passenger vehicle, shall

7. Section 16 of the Regulations is amended by adding the following after subsection (3):

(4) Subject to sections 19 and 19.1, heavy-duty engines of the 2014 or later model year used or intended for use in heavy-duty vehicles that have a GVWR of more than 6,350 kg (14,000 pounds) shall be equipped with an on-board diagnostic system that conforms to the standards applicable to engines of that model year set out in section 18, subpart A, of the CFR.

8. The portion of section 17 of the Regulations before paragraph (a) is replaced by the following:

17. Subject to sections 17.1, 19, 19.1 and 32.2, motorcycles of a specific model year

9. The Regulations are amended by adding the following after section 19:

VEHICLES EQUIVALENT TO VEHICLES COVERED BY AN EPA CERTIFICATE

19.1 (1) Every vehicle of a specific model year that is equivalent to a vehicle covered by an EPA certificate and that is sold in Canada during the period for which that EPA certificate is valid in the United States shall conform to, instead of the standards set out in sections 11 to 17, the certification and in-use standards referred to in that EPA certificate.

(2) The equivalency of a vehicle to a vehicle covered by an EPA certificate is determined by the Minister on the basis of the evidence of conformity obtained and produced by a company under section 35.1.

10. Section 23 of the French version of the Regulations is replaced by the following:

11. Subsection 24(7) of the English version of the Regulations is replaced by the following:

(7) When calculating the average NOx value under subsection (1) for a fleet of the 2004 model year, a company may include all vehicles of that model year, including those whose main assembly was completed before January 1, 2004.

12. Subsection 30(1) of the English version of the Regulations is replaced by the following:

30. (1) A company that acquires another company or that results from the merger of companies is responsible for offsetting, in accordance with section 29, any outstanding NOx emission deficits of the acquired company or merged companies.

13. Section 32 of the Regulations is amended by adding the following after subsection (5):

(6) For the purpose of subsection (1), a company that acquires another company or that results from the merger of companies and that is the owner of record on May 1 is responsible for ensuring that the end of model year report is submitted.

14. Subsection 32.3(4) of the Regulations is replaced by the following:

(4) When calculating the average HC+NOx value for a subfleet of the 2006 model year, a company may include all of its motorcycles of that model year, including those whose main assembly was completed before November 2, 2006.

15. Subsection 32.7(2) of the Regulations is replaced by the following:

(2) A company shall include the following in its end of model year report:

(a) a statement that each Class I, II or III motorcycle, as the case may be, imported or manufactured in Canada, for sale in Canada, conforms to the applicable standards referred to in paragraph 17(a) or section 17.1, 19, 19.1 or 32.2;

(b) in respect of each subfleet, a statement that

(i) each motorcycle in the subfleet meets all of the criteria set out in paragraph 32.2(3)(a), or

(ii) the subfleet contains motorcycles that do not meet all of the criteria set out in paragraph 32.2(3)(a) but the subfleet or the group of motorcycles referred to in subparagraph 32.2(3)(b)(ii) conforms to the emissions averaging requirements set out in paragraph 32.2(3)(b); and

(c) for each class, the total number of motorcycles and their model.

16. (1) Paragraph 35(1)(c) of the Regulations is replaced by the following:

(c) a copy of the records submitted to the EPA in support of the application for the EPA certificate in respect of the vehicle or engine and any application for an amendment to that EPA certificate; and

(2) The portion of paragraph 35(1)(d) of the French version of the Regulations before subparagraph (i) is replaced by the following:

35.1 (1) In the case of an equivalent vehicle referred to in section 19.1, evidence of conformity for the purpose of paragraph 153(1)(b) of the Act in respect of a company shall consist of

(a) a written statement that the vehicle has the same emission control features as the vehicle tested to obtain the EPA certificate and has no features that could cause it to have a higher level of emissions than that certified vehicle;

(b) a copy of the EPA certificate covering the vehicle to which it is equivalent;

(c) a copy of the records submitted to the EPA in support of the application for the EPA certificate in respect of the vehicle to which it is equivalent and any application for an amendment to that EPA certificate;

(d) an emission control information label that is permanently affixed to the vehicle in a readily accessible location and that contains information that is equivalent to the information required under

(i) section 1807(a), subpart S, of the CFR for the applicable model year of the light-duty vehicle, light-duty truck, medium-duty passenger vehicle or complete heavy-duty vehicle, other than the statement of compliance referred to in section 1807(a)(3)(v), subpart S, of the CFR,

(ii) section 413, subpart E, of the CFR for the applicable model year of the motorcycle, other than the statement of compliance referred to in section 413(a)(4)(viii), subpart E, of the CFR, or

(iii) section 35, subpart A, of the CFR for the applicable model year of the heavy-duty vehicle, other than the statements of compliance referred to in sections 35(a)(2)(iii)(E)(2), 35(a)(3)(iii)(H), 35(a)(4)(iii)(E) and 35(d)(2), subpart A, of the CFR; and

(e) additional evidence, obtained and produced in a form and manner satisfactory to the Minister, establishing that the vehicle and the vehicle covered by the EPA certificate are equivalent in that they share all the features described in the CFR that are used by the EPA to classify vehicles into test groups or engine families and, as applicable, families based on evaporative emissions, refueling emissions or permeation emissions.

(2) A company shall submit the evidence of conformity referred to in paragraphs (1)(a) and (b) to the Minister before importing a vehicle or applying a national emissions mark to it.

36. (1) For the purpose of paragraph 153(1)(b) of the Act, a company shall obtain and produce evidence of conformity for a vehicle or engine other than one referred to in section 35 or 35.1 in a form and manner satisfactory to the Minister instead of as specified in that section.

(2) A company shall submit the evidence of conformity to the Minister before importing a vehicle or engine or applying a national emissions mark to it.

18. (1)The portion of paragraph 38(1)(a) of the Regulations before subparagraph (i) is replaced by the following:

(a) the records referred to in paragraph 153(1)(g) of the Act and the evidence of conformity referred to in paragraphs 35(1)(a) to (c) and 35.1(1)(a) to (c) and, if applicable, (e) and subsection 36(1) for a period of

(2) Paragraph 38(3)(b) of the Regulations is replaced by the following:

(b) if the evidence of conformity or records referred to in section 35, 35.1 or 36 must be translated from a language other than French or English, 60 days after the request is delivered to the company.

19. The heading “GENERAL PROVISIONS” before section 39 and sections 39 and 40 of the Regulations are replaced by the following:

DECLARATION PRIOR TO IMPORTATION

39. (1) Subject to subsection (2), for the purpose of paragraph 153(1)(b) of the Act, any company that intends to import a light-duty vehicle, light-duty truck, medium-duty passenger vehicle or motorcycle during a given calendar year shall submit, prior to the first importation of a vehicle of a given class during that calendar year, a declaration in respect of that class to the Minister in a form and manner that is satisfactory to the Minister. This declaration must be signed by a duly authorized representative of the company and contain the following information:

(c) a statement that the vehicle will bear the national emissions mark or that the company will have the evidence of conformity referred to in section 35, 35.1 or 36.

(2) A company that imports a light-duty vehicle, light-duty truck, medium-duty passenger vehicle or motorcycle destined for first retail sale and that is authorized to apply and has applied the national emissions mark to the vehicle is exempt from the obligation of submitting the declaration to the Minister.

39.1 (1) Subject to subsection (2), for the purpose of paragraph 153(1)(b) of the Act, any company that intends to import a heavy-duty vehicle or a heavy-duty engine during a given calendar year shall submit, prior to the first importation of the vehicle or engine during that calendar year, a declaration to the Minister in a form and manner that is satisfactory to the Minister. This declaration must be signed by a duly authorized representative of the company and contain the following information:

(b) an indication of whether it is a heavy-duty vehicle or a heavy-duty engine that is to be imported; and

(c) a statement that the vehicle or engine will bear the national emissions mark or that the company will have the evidence of conformity referred to in section 35, 35.1 or 36.

(2) A company that imports a heavy-duty vehicle or heavy-duty engine destined for first retail sale and that is authorized to apply and has applied the national emissions mark to the vehicle or engine is exempt from the obligation of submitting the declaration to the Minister.

40. (1) Subject to subsection (2), a person that is not a company and that intends to import a vehicle or engine shall submit, prior to the importation, a declaration to the Minister in a form and manner that is satisfactory to the Minister. This declaration must be signed by the person or their duly authorized representative and contain the following information:

(d) in the case of a vehicle, the class, make, model, model year and, if known, identification number of the vehicle;

(e) in the case of an engine, the make, model, model year and, if known, identification number of the engine; and

(f) a statement

(i) from the person or their duly authorized representative that the vehicle or engine bears

(A) the national emissions mark,

(B) the U.S. emission control information label or, in the case of a heavy-duty engine, the U.S. engine information label referred to in paragraph 35(1)(d), showing that the vehicle or engine conformed to the EPA emission standards in effect when the main assembly of the vehicle or the manufacture of the engine, as the case may be, was completed, or

(C) a label showing that the vehicle or engine conformed to the emission standards of the California Air Resources Board in effect when the main assembly of the vehicle or the manufacture of the engine, as the case may be, was completed, or

(ii) from the manufacturer or its duly authorized representative that, as the case may be,

(A) the vehicle conformed to the standards set out in these Regulations or to the standards referred to in clause (i)(B) or (C) when its main assembly was completed, or

(B) the engine conformed to the standards set out in these Regulations or to the standards referred to in clause (i)(B) or (C) when its manufacture was completed.

(2) A person that is not a company and that imports no more than 10 engines or no more than 10 vehicles in a calendar year is exempt from the obligation of submitting the declaration to the Minister.

20. Subsection 41(1) of the Regulations is replaced by the following:

41. (1) The declaration referred to in paragraph 155(1)(a) of the Act shall be signed by the person referred to in that paragraph or their duly authorized representative and shall contain

(d) in the case of a vehicle, the class, make, model, model year and identification number of the vehicle;

(e) in the case of an engine, a description of the engine;

(f) a statement that the vehicle or engine will be used in Canada solely for purposes of exhibition, demonstration, evaluation or testing; and

(g) the date on which the vehicle or engine will be removed from Canada or destroyed.

21. Section 42 of the Regulations is replaced by the following:

42. A company that imports a vehicle or engine in reliance on subsection 153(2) of the Act shall submit a declaration to the Minister, signed by its duly authorized representative, that contains the following information:

(d) in the case of a vehicle, the class, make, model, model year and identification number of the vehicle;

(e) in the case of an engine, a description of the engine;

(f) a statement from the manufacturer of the vehicle or engine that the vehicle or engine will, when completed in accordance with instructions provided by the manufacturer, conform to the standards prescribed under these Regulations; and

(g) a statement that the vehicle or engine will be completed in accordance with the instructions referred to in paragraph (f).

42.1 A company that imports a heavy-duty vehicle or a heavy-duty engine shall, no later than June 30 of the calendar year following the calendar year during which the importation occurs, submit the following information to the Minister in a form and manner that is satisfactory to the Minister:

(a) the name of the importer;

(b) the name of the manufacturer of the heavy-duty vehicle or heavy-duty engine; and

(c) the make, model and model year of the heavy-duty vehicle or heavy-duty engine.

22. (1)The portion of subsection 44(1) of the Regulations before paragraph (a) is replaced by the following:

44. (1) A company applying under section 156 of the Act for an exemption from conformity with any standard prescribed under these Regulations shall, before importing an engine or vehicle or applying a national emissions mark to an engine or vehicle, submit in writing to the Minister

(2) Paragraph 44(1)(b) of the French version of the Regulations is replaced by the following:

(3) Paragraph 44(2)(c) of the Regulations is amended by adding “and” at the end of subparagraph (iii) and by repealing subparagraph (v).

23. Paragraph 45(3)(d) of the Regulations is replaced by the following:

(d) the total number or percentage of vehicles or engines repaired by or on behalf of the company, including vehicles or engines requiring inspection only.

24. The Regulations are amended by replacing “Subject to section 19” with “Subject to sections 19 and 19.1” in the following provisions:

(a) the portion of section 12 before paragraph (a);

(b) the portion of section 13 before paragraph (a);

(c) the portion of section 14 before paragraph (a); and

(d) subsections 16(1) to (3).

COMING INTO FORCE

25. These Regulations come into force on January 1, 2014.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Background

Significant regulatory actions were initiated under the Federal Agenda on Cleaner Vehicles, Engines and Fuels (February 2001) (see footnote 2) [the Agenda], which sets out a 10-year plan that includes regulations for vehicles, engines and fuels, both on- and off-road, and other initiatives to reduce air pollution from transportation sources. The regulatory actions set out in the Agenda were primarily based on a policy of alignment with the United States’ federal rules.

On January 1, 2003, the On-Road Vehicle and Engine Emission Regulations(see footnote 3) (the Regulations), made pursuant to the Canadian Environmental Protection Act, 1999 (CEPA 1999), were published in the Canada Gazette, Part II. They contain standards for smog-forming emissions such as nitrogen oxide (NOx), non-methane organic gases, carbon monoxide (CO), formaldehyde and particulate matter (PM) for various classes of on-road vehicles and engines, including requirements for On-Board Diagnostic (OBD) systems for light-duty vehicles, light-duty trucks, medium-duty passenger vehicles, complete heavy-duty vehicles, and heavy-duty vehicles that have a gross vehicle weight rating (GVWR) of 6 350 kg or less.

The On-Road Vehicle and Engine Emission Regulations came into effect on January 1, 2004, to align Canadian emission standards with those of the United States for light-duty passenger vehicles, light-duty trucks (such as vans, pickup trucks and sport utility vehicles), heavy-duty vehicles (such as heavy trucks and buses), and motorcycles.

Amendments to the Regulations are required to maintain alignment with new U.S. requirements for OBD systems on heavy-duty engines and heavy-duty vehicles, as well as administrative changes to streamline reporting requirements.

The Canadian Notice of intent to develop and implement regulations and other measures to reduce air emissions(see footnote 4) (October 2006) and the associated Regulatory Framework for Air Emissions(see footnote 5) released on April 26, 2007, reaffirmed the Government’s commitment to proposing additional regulations as needed to continue to align Canada’s emission standards aimed at reducing smog-forming emissions from vehicles, engines and fuel with those of the United States. More recently, the Canadian and U.S. governments announced the creation of the Regulatory Cooperation Council (RCC). This Council commits both countries to finding ways to reduce and prevent regulatory barriers to cross-border trade. By aligning its regulatory requirements with those of the United States, the Canadian government is striving to meet this objective. While the regulatory systems are very similar in the objectives they seek to achieve, there is value in enhancing the mechanisms in place to foster cooperation in designing regulations or to ensure alignment in their implementation or enforcement. Unnecessary regulatory differences and duplicative actions hinder cross-border trade and investment and ultimately impose a cost on to citizens, businesses and economies. The RCC will undertake efforts to better align the regulatory environment between Canada and the United States through a variety of tools such as enhanced technical collaboration, mutual recognition of standards and joint work sharing (see footnote 6).

On February 24, 2009, the U.S. Environmental Protection Agency (EPA) published a final rule to extend the OBD systems to on-road heavy-duty engines and vehicles that have a gross vehicle weight rating (GVWR) of more than 6 350 kg.

Issue and objectives

Both Canada and the United States have standards for smog-forming emissions for various classes of on-road vehicles and engines, including requirements for OBD systems. OBD systems are designed to monitor components for malfunctions and to identify such malfunctions to facilitate proper repair and maintain emission performance.

Because the North American engine and vehicle market is integrated, and to ensure a level playing field between all parties involved, Canada has a policy to align its requirements with corresponding federal emission standards of the EPA.

Heavy-duty vehicles and engines

Under the Regulations, a heavy-duty vehicle is defined as an on-road vehicle that has a GVWR of more than 3 856 kg, a curb weight of more than 2 722 kg or a vehicle frontal area in excess of 4.2 m2. These vehicles include large 3/4 ton pickup trucks, minibuses, school buses, road tractors and dump trucks.

The Canadian heavy-duty vehicle industry consists of a number of medium and small manufacturers. Most heavy-duty manufacturers target the North American market and concentrate their production in three categories: trucks, buses and engines.

Most heavy-duty engines are imported into Canada and most of these engines are manufactured in the United States. The engines are imported into Canada as single engines, incomplete heavy-duty vehicles, or complete heavy-duty vehicles. There is only one company that manufactures heavy-duty engines in Canada and all of its production is exported to the United States for final assembly in heavy-duty vehicles.

The 2008 Canadian production of heavy-duty vehicles consisted of 64 000 vehicles, of which approximately 90% were exported to the United States. Canadian sales of new heavy-duty vehicles in 2008 that had a GVWR of 6 350 kg or more (including buses) were estimated to be 50 500 (see footnote 7). It is estimated that approximately 93% of these sales were imported, of which 90% came from the United States and the remaining 10% came from Asia and Europe. The sales trend of the Canadian heavy-duty vehicles for the next decade is expected to be stable with a peak in 2012 at 59 900. (see footnote 8)

Objectives

On February 24, 2009, the U.S. EPA published a final rule (see footnote 9) to mandate that OBD systems be installed on heavy-duty engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg, which includes minibuses, school buses, road tractors and dump trucks. Given Canada’s policy of alignment, the Regulations Amending the On-Road Vehicle and Engine Emission Regulations (the Amendments) impose OBD requirements for heavy-duty engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg. Even if most Canadian production is exported to the United States and is therefore already compliant, the Amendments provide that all Canadian manufacturers, importers and distributors operating in the Canadian market comply with the same standards.

The Amendments include two principal changes to the existing Regulations, including

(a) a requirement that heavy-duty engines used or intended to be used in heavy-duty vehicles be equipped with an OBD system; and

(b) administrative changes to reduce administrative burden.

Description

Amendments

While the majority of heavy-duty vehicles and engines sold in Canada would likely already comply with U.S. EPA standards, it is important to recognize that some of these vehicles or engines sold in Canada may not. The Amendments add the requirement that heavy-duty engines of a specific model year (see footnote 10) used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg be equipped with an on-board diagnostic system that conforms to the standards set out in section 18 of title 40, chapter I, subchapter C, part 86, of the Code of Federal Regulations (CFR). This approach seeks to ensure that the specified standards are identical in both countries. Therefore, the Amendments create a level playing field for companies supplying the North American market for heavy-duty vehicles and engines. At the domestic level, it ensures that all manufacturers, importers and distributors comply with the same standards.

OBD system requirements for engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg

In the U.S. EPA final rule, heavy-duty engines used or intended for use in heavy-duty vehicles that have a GVWR of more than 6 350 kg are to be equipped with OBD systems designed to monitor the emission-related components for deterioration or malfunction. A malfunction will be determined when emissions increase beyond the applicable threshold specified in the U.S. EPA final rule or when the performance of a given component or system based on electrical information or temperature information is not within the prescribed range.

An OBD system monitors the performance of some of the engines’ major components, including individual emission controls. The system provides owners with an early warning of malfunctions by way of a dashboard “check engine” light. By giving vehicle owners this early warning, the OBD system protects not only the environment but also consumers, identifying minor problems before they become major repair bills. A repair technician would consult the vehicle’s OBD system before attempting a repair. OBD systems lead to more accurate and quicker diagnoses and more cost-effective repairs. They also reduce unnecessary trips back to the repair shop.

The Amendments define OBD system requirements for engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg, consistent with the U.S. EPA final rule. If the engines are imported as single engines or complete heavy-duty vehicles, they would need to be equipped with OBD systems before entering the country, while engines imported as incomplete heavy-duty vehicles would need to meet the requirements once the vehicles are completed. The Amendments apply to heavy-duty engines of the 2014 and later model years. (see footnote 11)

Administrative changes

In order to add clarity to the regulatory text, respond to comments made following prepublication in the Canada Gazette,Part I, and to reconcile the English and French versions of the Regulations, the following revisions were completed:

Clarify that it is the Minister who may, on the request of a company, determine if a vehicle is equivalent to another which is covered by an EPA certificate. The Amendments to the Regulations also specify the timeframe and the information that needs to be submitted to the Minister in order for him to consider the request.

Add text to section 35 of the Regulations that describes the requirements
1. for evidence of conformity for engines and vehicles covered by a U.S. EPA certificate; and
2. that documents submitted to the U.S. EPA for the purpose of amending the original application for certification must be maintained as part of the evidence of conformity.

Include an additional requirement for companies importing or manufacturing motorcycles to specify the total number of motorcycles imported or manufactured in Canada that will be offered for sale in Canada. This would help verify compliance and help ensure compliance with the Regulations.

Remove the requirement for companies to submit vehicle or engine identification numbers (VINs) and dates of importation as part of importation declarations and now require only one declaration to the Minister per calendar year prior to the first importation. These changes reduce the administrative burden on regulatees, while maintaining compliance performance.

Add that companies importing for the purpose of first retail sale (see footnote 12) vehicles or engines to which the national emission mark is affixed are exempt from the obligation of submitting an importation declaration if they meet the criteria that are specified in the Regulations.

Add that a person who is not a company according to CEPA 1999 and who imports 10 engines or fewer or 10 vehicles or fewer, in a calendar year, is exempt from the obligation of submitting the importation declaration.

Align the English and French versions of subsection 30(1) by replacing the term “purchase” with “acquire” in the English version to ensure consistency with the term “acquiert” in the French version, which covers a wider variety of corporate changes.

Add a subsection to section 32 to ensure that a company that acquires another company, including as a result of the merger of companies, and that is the owner of record on May 1, is required to submit an end of model year report.

Consultation

In recent years, several regulations have been adopted based on a policy of alignment with the U.S. standards, including these Regulations, the Off-Road Small Spark-Ignition Engine Emission Regulations and the Off-Road Compression-Ignition Engine Emission Regulations. The consultations associated with the development of each of those regulations revealed a broad consensus that Canada’s regulatory emission standards for on-road and off-road vehicles and engines should be based on alignment with the corresponding U.S. federal requirements. Most stakeholders have generally identified that the integrated nature of the Canadian/American economies and the implementation of aggressive national programs for on-road and off-road vehicles and engines by the U.S. EPA are two key elements supporting a policy of alignment with the United States’ federal programs as a logical approach for Canada to achieve significant emission reductions in a cost-effective manner.

In October 2009, Environment Canada signalled its intent to propose amendments to the Regulations to include new requirements for OBD system standards for engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg as part of a prepublication consultation package to stakeholders via email. The list of stakeholders includes other federal departments, manufacturers’ and importers’ associations representing the industry, and non-governmental organizations. These consultations indicated that there was broad support for the proposed Amendments.

Following the 75-day comment period of the prepublication of the proposed Amendments on October 29, 2011, the Department received comments from the following stakeholders:

Industry comments

Manufacturers’ associations (see footnote 13) indicated that they were in favour of the alignment of the U.S. and Canadian requirements for ODB systems used in heavy-duty engines.

The associations representing vehicle manufacturers and importers commented that importation declarations represented an administrative burden to the industry and that they should be simplified or eliminated.

These associations also indicated that requirements to provide vehicle identification numbers and the start and end dates for the period of production for each model of vehicle would be extremely challenging and costly.

Most associations indicated that they were not in favour of repealing section 4 of the Regulations, which allows a vehicle to be deemed covered by an EPA certificate. They indicated that they believe this section is still required. One association suggested that the Department clarify the requirements of the provision as an alternative to its deletion.

The Department agreed with the industry’s comments and implemented changes to the final amendments that address those concerns. The updated provisions are described in more detail in the section entitled “Administrative changes” of this document.

As a general comment, manufacturing industry representatives indicated that Environment Canada should coordinate reporting requirements with other departments in order to avoid duplication of the information they have to provide to the federal government.

Other stakeholder comments

Provinces, the World Trade Organization, environmental organizations and other stakeholders were consulted; however, none submitted comments.

Streamlining Government of Canada reporting requirements

The Government of Canada is committed to minimizing duplication of effort concerning reporting requirements. Therefore, Environment Canada is working with the Canadian Border Services Agency (CBSA) and other departments to develop the Other Government Department Single Window Initiative (see footnote 14) which seeks to eliminate paper-based reporting of commercial trade data while developing a common, electronic interface and framework with the trade community. The initiative aims to streamline the collection of trade data by creating a single electronic interface for businesses to submit, to the CBSA and other government departments, the pre-arrival information (import and export regulatory requirements) required to clear most shipments at the border. By eliminating the need to send the same trade information to multiple government departments, businesses in the trade chain will benefit from the faster clearance of goods and lower administrative costs. It will also enable more advanced approaches to the collection, consolidation and dissemination of commercial trade data for the trade community and regulating programs.

“One-for-One” Rule

The “One-for-One” Rule was implemented to control new administrative burden imposed on businesses as a result of regulations. In summary, the rule requires that departments

restrict the growth of administrative burden by ensuring that new administrative burden on business introduced by a regulatory change is offset by an equal decrease in administrative burden on business from the existing stock of regulations; and

control the number of regulations by repealing at least one existing regulation every time a new one imposing administrative burden on business is introduced.

The administrative changes that will be implemented through these Amendments will result in a net decrease in regulatory burden; therefore, the proposal is considered an “OUT” under the Rule. Reductions in burden will be achieved primarily by removing requirements related to the submission of VINs and dates of importation in the importation declarations and reducing the frequency of submission of importation declarations.

Based on calculations carried out using the Standard Cost Model methodology, these regulatory changes will result in an annualized decrease in total administrative costs to all businesses subject to the regulations of approximately C$1.5 million, or C$930 per business. (see footnote 15)

Small business lens

The Government has tasked regulators with examining the effects of their regulations through a small business lens to ensure that regulatory requirements do not have unintended impacts on small businesses and that regulations are administered as fairly and efficiently as possible.

As noted earlier, the administrative changes that will be implemented through these Amendments will result in a net decrease in regulatory burden, which will benefit all businesses that are subject to the Regulations, including small businesses. In addition, the estimated maximum nation-wide annual cost impact of these Amendments is $857,710, lower than the $1-million threshold required to trigger a full analysis under the small business lens. For these reasons, a full analysis under the small business lens is not required for these Amendments.

Rationale

There are strong environmental and economic rationales for Canada to continue to align its emission standards with those of the United States. In the context of the highly integrated nature of the North American engine and vehicle manufacturing industry and progressive U.S. federal emission standards, there has been broad stakeholder (i.e. industry, other government departments, provinces, environmental non-governmental organizations) support for the policy of Canada-United States alignment of standards. This support was evidenced throughout the consultation process associated with the regulatory development processes for the On-Road Vehicle and Engine Emission Regulations, the Off-Road Small Spark-Ignition Engine Emission Regulations and the Off-Road Compression-Ignition Engine Emission Regulations that are in force under CEPA 1999. Aligning with U.S. standards allows for significant reductions in emissions and is cost-effective for companies and consumers.

The Amendments provide greater assurance through the OBD requirements that the air quality and health benefits associated with the reduction in emissions resulting from the Regulations will actually occur.

In addition to the health and environmental benefits, the Amendments create a level playing field for companies supplying the North American market for heavy-duty vehicles and engines.

It is also anticipated that the OBD system requirements would provide additional benefits to consumers, by identifying minor problems before they become major repair bills. OBD systems lead to more accurate and quicker diagnoses and more cost-effective repairs. This also reduces unnecessary trips back to the repair shop.

Furthermore, given that the emission certification process for engines and vehicles is complex and costly for manufacturers and governments, aligning Canada’s requirements for OBD with those of the U.S. EPA allow Canada to benefit from the U.S. EPA’s emission certification program. This results in significant cost savings for Canadian companies, the federal government and Canadian consumers.

The increased costs to manufacturers to meet the additional OBD standards for heavy-duty vehicles have been estimated by the U.S. EPA in their support document (see footnote 16) associated with the final rulemaking. The U.S. EPA estimated that, in order for manufacturers to design, certify, and build compliant heavy-duty engines used or intended to be used in heavy-duty vehicles that have a GVWR of more than 6 350 kg, the additional costs are expected to range from a maximum C$82 for a gasoline engine to a maximum of C$176 for a diesel engine. (see footnote 17)

Given that most heavy-duty engines and vehicles sold in Canada are designed for both the U.S. and Canadian markets, much of the technology development and manufacturing changes required to meet the new, more stringent OBD standards in the U.S. final rulemaking was implemented by manufacturers in order to comply with the U.S. EPA rules. Accordingly, much of the increased cost was already incurred even though there was no Canadian requirement for OBD yet. Using 2008 sales data, (see footnote 18) along with the estimated incremental per engine costs shown above, and assuming that all vehicles and engines are non-compliant, the maximum incremental cost for the implementation of the OBD standards to heavy-duty vehicles is estimated at C$8 million. However, based on the conservative assumptions that at least 90% of the heavy-duty vehicles that enter into the Canadian market will be U.S. EPA-compliant and that only 5% of Canadian production is for the Canadian market, the estimated incremental cost would be approximately C$858,000 (see footnote 19) per year.

Heavy-Duty Vehicles

2008 total sales of heavy-duty vehicles in Canada (over 6 350 kg)

50 501 units

Heavy-duty vehicles imported for sale in Canada (93% of total vehicle sales)

Consumers would likely bear the incremental costs through increase in prices of heavy-duty vehicles. However, considering that very few heavy-duty vehicles are priced under $100,000 and some go over $450,000, the added cost for OBD compliance is considered to be insignificant. In addition, as described previously, it is expected that these costs would be partially offset by savings from reduced maintenance costs from emission control systems throughout the life of the engine and less likely to require service.

By changing the importation declaration requirements, the Department is also reducing the administrative burden to the industry. The Government is updating its requirement to mandate that only one importation declaration per manufacturer or importer be submitted each calendar year.

The importation declaration requires the importer to identify itself as well as what type of vehicles/engines will be imported during the year (e.g. heavy-duty vehicles, motorcycles), and confirm that all these vehicles will meet the requirements.

This declaration must be submitted prior to the first importation of vehicles or engines, as the case may be. Before the introduction of this change, importation declarations had to be submitted with every shipment.

The content of the declaration was also updated to only require information to identify companies and the type of vehicle being imported during the year. Previously, requested information included vehicle or engine identification numbers, number of units imported, and date of shipment. These items were removed because the information was already collected through end of model year reporting.

Another change made following consultations is that companies importing for the purpose of first retail sale vehicles or engines to which a national emission mark is affixed are now exempt from the obligation of submitting importation declarations. These companies have already been identified through Environment Canada’s national authorization process and are required to submit an end of model year report that describes the type of vehicles or engines that were imported during the year.

The Department added the requirement that companies provide a summary of the total number of motorcycles they have imported or manufactured in Canada in the annual end of model year report, whereas previously companies were required to provide the information in each importation declaration by giving identification numbers for each vehicle. This change does not constitute an added administrative burden because providing the total number of motorcycles as part of the new requirement would be less onerous than providing the identification number for each vehicle, as in the current requirement.

Introduction of these changes will result in an estimated reduction in administrative burden for the industry of approximately C$1.5 million per year.

Incremental costs would be incurred by the federal government associated with the administration of the Amendments to supplement the existing program under the Regulations. The major cost components would include regulatory administration, compliance promotion, compliance verification and enforcement activities related to the OBD system requirements for heavy-duty vehicles. The incremental total annual cost to government to implement the Amendments would vary from year to year and is estimated to be up to $50,000 per year during the initial years of implementation.

As the Amendments are structured in a manner that helps deliver the environmental objective of reducing emissions from heavy-duty vehicles and engines and minimize the regulatory burden on companies, the overall net impact of the Amendments is expected to be positive.

Implementation, enforcement and service standards

Implementation

Environment Canada administers a comprehensive program to monitor compliance with vehicle and engine emission standards. Manufacturers and importers are responsible for ensuring that their products comply with the Amendments and are required to maintain and produce evidence of such conformity. Environment Canada’s program to monitor compliance includes

authorizing and monitoring use of the national emissions mark;

monitoring vehicle and engine importation;

reviewing company evidence of conformity;

monitoring data submission for compliance with the emissions averaging program;

registering company notices of defects affecting emission controls;

inspecting test engines and vehicles and their emission-related components; and

testing laboratory emissions of sample new engines and vehicles that are representative of products offered for sale in Canada.

Environment Canada coordinates efforts with the U.S. EPA by sharing information to increase program efficiency and effectiveness.

If an engine or vehicle is found not to comply with the Amendments, the manufacturer or importer will be subject to the enforcement provisions of CEPA 1999. In this situation, the normal course of events is to first perform an engineering assessment to determine if a notice of defect should be issued.

Environment Canada also plans to undertake various compliance promotion activities, such as

providing information to regulatees concerning the requirements of the Amendments;

maintaining a Web page related to the Amendments on Environment Canada’s CEPA Environmental Registry to make such information widely available; and

distributing advisory emails and letters, and responding to inquiries, as required.

Enforcement

Environment Canada’s Compliance and Enforcement Policy (see footnote 20) for CEPA 1999 will be applied when verifying compliance with the Amendments. This Policy sets out the range of possible responses to alleged violations, including

warnings;

directions;

environmental protection compliance orders;

ticketing;

ministerial orders;

injunctions;

prosecution; and

environmental protection alternative measures (which are an alternative to a court prosecution after the laying of charges for a CEPA 1999 violation).

In addition, the policy explains when Environment Canada will resort to civil suits by the Crown for cost recovery.

To verify compliance, enforcement officers may carry out an inspection. An inspection may identify an alleged violation, and alleged violations may also be identified by Environment Canada’s technical personnel, through information transmitted to the Department by the Canada Border Services Agency or through complaints received from the public. Whenever a possible violation of the Regulations is identified, enforcement officers may carry out investigations.

When, following an inspection or an investigation, an enforcement officer discovers an alleged violation, the officer will choose the appropriate enforcement action based on the following factors:

Nature of the alleged violation: This includes consideration of the damage, the intent of the alleged violator, whether it is a repeat violation, and whether an attempt has been made to conceal information or otherwise subvert the objectives and requirements of the Act.

Effectiveness in achieving the desired result with the alleged violator: The desired result is compliance within the shortest possible time with no further repetition of the violation. Factors to be considered include the violator’s history of compliance with the Act, willingness to cooperate with enforcement officers, and evidence of corrective action already taken.

Consistency in enforcement: enforcement officers will consider how similar situations have been handled in determining the measures to be taken to enforce the Act.

Service standards

According to CEPA 1999, vehicles must conform to standards prescribed by the Regulations, and evidence of conformity with those standards must be “obtained and produced in the prescribed form and manner or, if the regulations so provide, in a form and manner satisfactory to the Minister.”

For these Amendments, in its administrative process, the Department will send a response to the manufacturer or the importer once it receives evidence of conformity. The Department’s response will generally consist of the following:

acknowledgement that the evidence of conformity was received;

request for additional information (if necessary); and

acknowledgement that the evidence presented is considered to be “in a form and manner that is satisfactory” based on a set of criteria established by the Department.

A guidance document will also be published to present what evidence of conformity is required and what procedures should be followed when submitting required documentations. Environment Canada will strive to respond to submissions according to the timelines.

Footnote 4Notice of intent to develop and implement regulations and other measures to
reduce air emissions, Canada Gazette, Part I, October 21, 2006, Vol. 140,
No. 42 at page 3351, available at www.gazette.gc.ca/rp-pr/p1/2006/2006-10-21/pdf/g1-14042.pdf.

(a) if the period of production of a model of vehicle or engine does not include January 1 of a calendar year, correspond to the calendar year during which the period of production falls; or

(b) if the period of production of a model of vehicle or engine includes January 1 of a calendar year, correspond to that calendar year.

(2) The period of production of a model of vehicle or engine shall include only one January 1.

Footnote 11
The model year is the year that is used by a manufacturer to define a model of vehicle. The requirements that relate to the model year are defined in the Regulations.

Footnote 12
The concept of first retail sale is necessary to distinguish a company that imports a “used” vehicle to which the NEM is affixed. These companies would not be exempt from this obligation.

Footnote 13
Stakeholders were represented by the Canadian Vehicle Manufacturers’ Association (CVMA), the Motorcycle & Moped Industry Council (MMIC), the Truck and Engine Manufacturers Association (EMA), and the Association of International Automobile Manufacturers of Canada (AIAMC).